WASHINGTON, D.C. — Today, cryptocurrencies including Bitcoin and dogecoin are falling precipitously in value, with some losing nearly half their value. Meanwhile, Charles Schwab Corp., a major broker with millions of small investors, announced products to allow its clients to speculate in this area. Recently, Facebook refashioned its global cryptocoin into a U.S.-only product it calls Diem. Bartlett Naylor, financial policy advocate at Public Citizen, issued the following statement:
“Purchasers of crypto coins must seriously consider whether they may be little more than Ponzi schemes. The market valuation of all such alternative coins was roughly $2 trillion before today’s collapse, yet there are no earnings or real products behind them. This $2 trillion entirely depends on faith—on the ability to unload them to another buyer.
“Meanwhile, there are nearly 4,000 such coins, of which Bitcoin is merely one. It’s tough to rely on them as an inflation hedge if they can be created even as a prank, as with dogecoin.
“Crypto coins that rise and fall in value can’t work as a medium of exchange, since a consumer wouldn’t use them if they thought the value would rise, and a vendor wouldn’t accept them if they figured the value would fall.
“Those pegged to a known price, such as the dollar, may be little more than a debit or gift card.
“Schwab shouldn’t be inviting its clients into a Ponzi scheme, especially without redlined warnings. Nor should Facebook be allowed to exploit its sprawling 3-billion-person user base to threaten a takeover of how people pay for products.”
“Currently, crypto currencies are largely unregulated. The Securities and Exchange Commission has brought enforcement actions for raising money for digital assets without registration with the regulator. At his confirmation hearing, SEC Chair Gary Gensler said Congress must provide his agency with the authority to regulate crypto exchanges.”